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Allowance for Credit Losses

9 Months Ended

Sep. 30, 2020

Note 4 — Allowance for Credit Losses

We adopted the provisions of ASU 2016-13 on January 1, 2020 on a modified retrospective basis. Results and information regarding our allowance for credit losses (“ACL”) included in this Note are calculated and presented in accordance with that accounting standards update. Results and information prior to January 1, 2020 are calculated and presented in accordance with previously applicable U.S. GAAP.

ASU 2016-13 replaces the long-standing incurred loss model with an expected credit loss model that recognizes credit losses over the life of a financial asset. Expected credit losses capture historical information, current conditions, and reasonable and supportable forecasts of future conditions. The ACL is deducted from the amortized cost of an instrument to present the net amount expected to be collected on the financial asset. Our ACL primarily consists of the aggregate ACL estimates of our Subsidiary Banks. The estimates are established through charges to operations in the form of charges to provisions for credit loss expense. Loan losses or recoveries are charged or credited directly to the ACL. The ACL of each Subsidiary Bank is maintained at a level considered appropriate by management, based on estimated current expected credit losses in the current loan portfolio, including information about past events, current conditions and reasonable and supportable forecasts.

The estimation of the ACL is based on a loss-rate methodology that measures lifetime losses on loan pools that have similar risk characteristics. Loans that do not have similar risk characteristics are evaluated on an individual basis. The segmentation of the loan portfolio into pools requires a balancing process between capturing similar risk characteristics and containing sufficient loss history to provide meaningful results. Our segmentation starts at the general loan category with further sub-segmentation based on collateral types that may be of meaningful size and/or may contain sufficient differences in risk characteristics based on management’s judgement that would warrant further segmentation. The general loan categories along with primary risk characteristics used in our calculation are as follows:

Commercial and industrial loans. This category includes loans extended to a diverse array of businesses for working capital or equipment purchases. These loans are mostly secured by the collateral pledged by the borrower that is directly related to the business activities of the company such as equipment, accounts receivable and inventory. The borrower’s abilities to generate revenues from equipment purchases, collect accounts receivable, and to turn inventory

into sales are risk factors in the repayment of the loan. A small portion of this loan category is related to loans secured by oil & gas production and loans secured by aircraft.

Construction and land development loans. This category includes the development of land from unimproved land to lot development for both residential and commercial use and vertical construction across residential and commercial real estate classes. These loans carry risk of repayment when projects incur cost overruns, have an increase in the price of construction materials, encounter zoning, entitlement and environmental issues, or encounter other factors that may affect the completion of a project on time and on budget. Additionally, repayment risk may be negatively impacted when the market experiences a deterioration in the value of real estate. Risks specifically related to 1-4 family development loans also include mortgage rate risk and the practice by the mortgage industry of more restrictive underwriting standards, which inhibits the buyer from obtaining long term financing creating excessive housing and lot inventory in the market.

Commercial real estate loans. This category includes loans secured by farmland, multifamily properties, owner occupied commercial properties, and non-owner occupied commercial properties. Owner occupied commercial properties include warehouses often along the border for import/export operations, office space where the borrower is the primary tenant, restaurants and other single-tenant retail. Non-owner occupied commercial properties include hotels, retail centers, office and professional buildings, and leased warehouses. These loans carry risk of repayment when market values deteriorate, the business experiences turnover in key management, the business has an inability to attract or keep occupancy levels stable, or when the market experiences an exit of a specific business type that is significant to the local economy, such as a manufacturing plant.

1-4 family mortgages. This category includes both first and second lien mortgages for the purpose of home purchases or refinancing of existing mortgage loans. A small portion of this loan category is related to home equity lines of credits, lots purchases, and home construction. Loan repayments may be affected by unemployment or underemployment and deteriorating market values of real estate.

Consumer loans. This category includes deposit secured, vehicle secured, and unsecured loans, including overdrafts, made to individuals. Repayment is primarily affected by unemployment or underemployment.

The loan pools are further broken down using a risk-based segmentation based on internal classifications for commercial loans and past due status for consumer mortgage loans. Non-mortgage consumer loans are evaluated as one segment. On a weekly basis, commercial loan past due reports are reviewed by the credit quality committee to determine if a loan has any potential problems and if a loan should be placed on our internal Watch List report. Additionally, our credit department reviews the majority of our loans for proper internal classification purposes regardless of whether they are past due and segregates any loans with potential problems for further review. The credit department will discuss the potential problem loans with the servicing loan officers to determine any relevant issues that were not discovered in the evaluation. Also, an analysis of loans that is provided through examinations by regulatory authorities is considered in the review process. After the above analysis is completed, we will determine if a loan should be placed on an internal Watch List report because of issues related to the analysis of the credit, credit documents, collateral and/or payment history.

Our internal Watch List report is segregated into the following categories: (i) Pass, (ii) Economic Monitoring, (iii) Special Review, (iv) Watch List—Pass, or (v) Watch List—Substandard, and (vi) Watch List—Doubtful. The loans placed in the Special Review category and lower rated credits reflect our opinion that the loans reflect potential weakness which require monitoring on a more frequent basis. Credits in those categories are reviewed and discussed on a regular basis, no less frequently than quarterly, with the credit department and the lending staff to determine if a change in category is warranted. The loans placed in the Watch List—Pass category and lower rated credits reflect our opinion that the credit contains weaknesses which represent a greater degree of risk, which warrant “extra attention.” Credits in this category are reviewed and discussed on a regular basis with the credit department and the lending staff to determine if a change in category is warranted. The loans placed in the Watch List—Substandard category are considered to be potentially inadequately protected by the current sound worth and debt service capacity of the borrower or of any pledged collateral. These credit obligations, even if apparently protected by collateral value, have shown defined weaknesses related to adverse financial, managerial, economic, market or political conditions which may jeopardize repayment of principal and interest. Furthermore, there is the possibility that we may sustain some future loss if such weaknesses are not corrected.

The loans placed in the Watch List—Doubtful category have shown defined weaknesses and it is likely, based on current information and events, that we will be unable to collect all principal and/or interest amounts contractually due. Watch List—Doubtful loans are placed on non-accrual when they are moved to that category.

For the purposes of the ACL, in order to maintain segments with sufficient history for meaningful results, the credits in the Pass and Economic Monitoring categories are aggregated, the credits in the Special Review and Watch List—Pass credits are aggregated, and the credits in the Watch List—Substandard category remain in their own segment. For loans that are classified as Watch List—Doubtful, management evaluates these credits in accordance with ASC 310-10, “Receivables,” and, if deemed necessary, a specific reserve is allocated to the loan. The specific reserve allocated under ASC 310-10, is based on (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the loan’s observable market price; or (iii) net realizable value of the fair value of the collateral if the loan is collateral dependent. Substantially all of our loans evaluated as Watch List—Doubtful under ASC 310-10 are measured using the fair value of collateral method. In rare cases, we may use other methods to determine the specific reserve of a loan under ASC 310-10 if such loan is not collateral dependent.

Within each collectively evaluated pool, the robustness of the lifetime historical loss-rate is evaluated and, if needed, is supplemented with peer loss rates through a model risk adjustment. Certain qualitative loss factors are then evaluated to incorporate management’s two-year reasonable and supportable forecast period followed by a reversion to the pool’s average lifetime loss-rate. Those qualitative loss factors are: (i) trends in portfolio volume and composition, (ii) volume and trends in classified loans, delinquencies, non-accruals and TDR’s, (iii) concentration risk, (iv) trends in underlying collateral value, (v) changes in policies, procedures, and strategies, and (vi) economic conditions. Qualitative factors also include potential losses stemming from operational risk factors arising from fraud, natural disasters, pandemics and geopolitical events. Should any of the factors considered by management in evaluating the adequacy of the ACL change, our estimate could also change, which could affect the level of future credit loss expense.

We have elected to not measure an ACL for accrued interest receivable given our timely approach in identifying and writing off uncollectible accrued interest. An ACL for off-balance sheet exposure is derived from a projected usage rate of any unfunded commitment multiplied by the historical loss rate, plus model risk adjustment, if any, of the on-balance sheet loan pools.

Our management continually reviews the ACL of the Subsidiary Banks using the amounts determined from the estimates established on specific doubtful loans, the estimate established on quantitative historical loss percentages, and the estimate based on qualitative current conditions and reasonable and supportable two-year forecasted data. Our methodology reverts to the average lifetime loss-rate beyond the forecast period when we can no longer develop reasonable and supportable forecasts. Should any of the factors considered by management in evaluating the adequacy of the estimate for current expected credit losses change, our estimate of current expected credit losses could also change, which could affect the level of future credit loss expense. While the calculation of our ACL utilizes management’s best judgment and all information reasonably available, the adequacy of the ACL is dependent on a variety of factors beyond our control, including, among other things, the performance of the entire loan portfolio, the economy, government actions, changes in interest rates and the view of regulatory authorities towards loan classifications.

A summary of the transactions in the allowance for credit loan losses by loan class is as follows:


	Three Months Ended September 30, 2020
	Domestic														Foreign
			Commercial
			Real Estate:
			Other		Commercial
			Construction &		Real Estate:		Commercial
			Land		Farmland &		Real Estate:		Residential:		Residential:
	Commercial		Development		Commercial		Multifamily		First Lien		Junior Lien		Consumer		Foreign		Total

	(Dollars in Thousands)

Balance at June 30, 2020	$	20,079	$	40,924	$	18,711	$	1,864	$	3,208	$	8,964	$	288	$	516	$	94,554
Losses charged to allowance		(1,735)		—		—		—		(87)		(3)		(62)		—		(1,887)
Recoveries credited to allowance		523		14		86		—		8		51		46		—		728
Net (losses) recoveries charged to allowance		(1,212)		14		86		—		(79)		48		(16)		—		(1,159)

Provision charged (credited) to operations		3,277		(2,855)		4,892		2,639		400		293		2		122		8,770

Balance at September 30, 2020	$	22,144	$	38,083	$	23,689	$	4,503	$	3,529	$	9,305	$	274	$	638	$	102,165


	Three Months Ended September 30, 2019
	Domestic														Foreign
			Commercial
			Real Estate:
			Other		Commercial
			Construction &		Real Estate:		Commercial
			Land		Farmland &		Real Estate:		Residential:		Residential:
	Commercial		Development		Commercial		Multifamily		First Lien		Junior Lien		Consumer		Foreign		Total

	(Dollars in Thousands)

Balance at June 30, 2019	$	11,780	$	15,273	$	17,029	$	1,849	$	3,627	$	7,312	$	488	$	845	$	58,203
Losses charged to allowance		(3,231)		—		(468)		—		(164)		(214)		(216)		—		(4,293)
Recoveries credited to allowance		585		4		10		—		3		65		5		—		672
Net (losses) recoveries charged to allowance		(2,646)		4		(458)		—		(161)		(149)		(211)		—		(3,621)

Provision charged (credited) to operations		1,837		1,573		230		350		263		852		199		(26)		5,278

Balance at September 30, 2019	$	10,971	$	16,850	$	16,801	$	2,199	$	3,729	$	8,015	$	476	$	819	$	59,860


	Nine Months Ended September 30, 2020
	Domestic														Foreign
			Commercial
			Real Estate:
			Other		Commercial
			Construction &		Real Estate:		Commercial
			Land		Farmland &		Real Estate:		Residential:		Residential:
	Commercial		Development		Commercial		Multifamily		First Lien		Junior Lien		Consumer		Foreign		Total

	(Dollars in Thousands)

Balance at December 31, 2019	$	11,145	$	18,152	$	16,533	$	1,786	$	3,762	$	7,535	$	542	$	823	$	60,278

Adoption of ASU 2016-13		4,247		13,391		(4,292)		(355)		(1,580)		(429)		(225)		(410)		10,347

Losses charged to allowance		(6,696)		(19)		(55)		—		(123)		(124)		(192)		—		(7,209)
Recoveries credited to allowance		1,793		15		107		—		10		171		58		—		2,154
Net (losses) recoveries charged to allowance		(4,903)		(4)		52		—		(113)		47		(134)		—		(5,055)

Provision charged to operations		11,655		6,544		11,396		3,072		1,460		2,152		91		225		36,595

Balance at September 30, 2020		$	22,144		$	38,083		$	23,689		$	4,503		$	3,529		$	9,305		$	274		$	638		$	102,165


	Nine Months Ended September 30, 2019
	Domestic														Foreign
			Commercial
			Real Estate:
			Other		Commercial
			Construction &		Real Estate:		Commercial
			Land		Farmland &		Real Estate:		Residential:		Residential:
	Commercial		Development		Commercial		Multifamily		First Lien		Junior Lien		Consumer		Foreign		Total

	(Dollars in Thousands)

Balance at December 31, 2018	$	12,596	$	15,123	$	19,353	$	1,808	$	3,467	$	7,719	$	447	$	871	$	61,384
Losses charged to allowance		(11,011)		—		(7,347)		—		(166)		(314)		(334)		—		(19,172)
Recoveries credited to allowance		1,631		80		308		—		14		222		30		—		2,285
Net (losses) recoveries charged to allowance		(9,380)		80		(7,039)		—		(152)		(92)		(304)		—		(16,887)

Provision charged (credited) to operations		7,755		1,647		4,487		391		414		388		333		(52)		15,363

Balance at September 30, 2019	$	10,971	$	16,850	$	16,801	$	2,199	$	3,729	$	8,015	$	476	$	819	$	59,860

The increase in credit loss expense for the three and nine months ended September 30, 2020 can be primarily attributed to the deteriorating economic conditions occurring in those periods as a result of COVID-19 and the impact of those conditions on certain segments of our ACL calculation for those periods. We adopted the provisions of ASU 2016-13 on January 1, 2020, resulting in a transition from the long-standing incurred loss model to an expected credit loss model. Impacting the provision for loan loss for the nine months ended September 30, 2019 is a relationship that is secured by multiple pieces of real property on which car dealerships are operated. The relationship began deteriorating in the fourth quarter of 2018, triggered by significant fraud by a high level insider of the car dealership resulting in the dealerships unexpectedly filing for bankruptcy and creating an exposure for potential loss since the operations of the dealerships were the source of repayment from the borrower. The relationship further deteriorated in the first quarter of 2019 after the court approved debtor in possession plan sponsor discontinued its role in the process and thus did not fulfill its obligation to assume full responsibility of the accrued and unpaid interest. Although the relationship is secured by real property (the dealerships’ real estate), the real property has specialized use, contributing to the potential exposure for probable loss. During the first quarter of 2019, in light of the circumstances and management’s evaluation of the relationship, the decision was made to classify the relationship as doubtful (previously referred to as impaired prior to the adoption of ASU 2016-13), non-accrual status and place a specific reserve on the relationship in the amount of $9.5 million. During the second quarter of 2019, management continued to evaluate the relationship and decided to foreclose on the underlying real estate collateral, resulting in a charge-off of approximately $9,500,000, reflected in the tables above as part of the Commercial and Commercial Real Estate: Farmland and Commercial categories.

The table below provides additional information on the balance of loans individually or collectively evaluated for impairment and their related allowance, by loan class as of September 30, 2020 and December 31, 2019:


	September 30, 2020
	Loans Individually				Loans Collectively
	Evaluated For				Evaluated For
	Impairment				Impairment
	Recorded				Recorded
	Investment		Allowance		Investment		Allowance

	(Dollars in Thousands)
Domestic
Commercial	$	1,444	$	411	$	1,876,535	$	21,733
Commercial real estate: other construction & land development		911		70		1,942,519		38,013
Commercial real estate: farmland & commercial		501		—		2,110,448		23,689
Commercial real estate: multifamily		137		—		437,801		4,503
Residential: first lien		243		—		409,772		3,529
Residential: junior lien		38		—		623,593		9,305
Consumer		3		—		41,107		274
Foreign		—		—		144,183		638

Total	$	3,277	$	481	$	7,585,958	$	101,684


	December 31, 2019
	Loans Individually				Loans Collectively
	Evaluated For				Evaluated For
	Impairment				Impairment
	Recorded				Recorded
	Investment		Allowance		Investment		Allowance

	(Dollars in Thousands)
Domestic
Commercial	$	1,935	$	249	$	1,290,725	$	10,895
Commercial real estate: other construction & land development		938		116		2,184,945		18,037
Commercial real estate: farmland & commercial		1,208		—		1,895,539		16,533
Commercial real estate: multifamily		165		—		190,265		1,786
Residential: first lien		6,278		—		427,623		3,762
Residential: junior lien		692		—		705,784		7,535
Consumer		1,195		—		46,605		542
Foreign		264		—		140,785		823

Total	$	12,675	$	365	$	6,882,271	$	59,913

The table below provides additional information on loans accounted for on a non-accrual basis by loan class at September 30, 2020 and December 31, 2019:


	September 30, 2020		December 31, 2019

	(Dollars in Thousands)
Domestic
Commercial	$	1,444	$	1,901
Commercial real estate: other construction & land development		911		938
Commercial real estate: farmland & commercial		501		1,208
Commercial real estate: multifamily		137		165
Residential: first lien		727		670
Residential: junior lien		38		—
Consumer		3		4
Total non-accrual loans	$	3,761	$	4,886

Watch—List Doubtful loans are those loans where it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. We have identified these loans through our normal loan review procedures. Watch—List Doubtful loans are measured based on (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the loan’s observable market price; or (iii) the fair value of the collateral, if the loan is collateral dependent. Substantially all of our doubtful loans are measured at the fair value of the collateral. In limited cases, we may use other methods to determine the level of impairment of a loan if such loan is not collateral dependent.

The following tables detail key information regarding our doubtful (previously referred to as impaired prior to the adoption of ASU 2016-13) loans by loan class at December 31, 2019, in accordance with ASC 310 prior to the adoption of ASU 2016-13:


	December 31, 2019
			Unpaid				Average
	Recorded		Principal		Related		Recorded		Interest
	Investment		Balance		Allowance		Investment		Recognized

	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	510	$	516	$	249	$	514	$	—
Commercial real estate: other construction & land development		126		169		116		131		—
Total impaired loans with related allowance	$	636	$	685	$	365	$	645	$	—


	December 31, 2019
			Unpaid		Average
	Recorded		Principal		Recorded		Interest
	Investment		Balance		Investment		Recognized

	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	1,425	$	1,516	$	16,194	$	3
Commercial real estate: other construction & land development		812		1,133		2,151		—
Commercial real estate: farmland & commercial		1,208		1,841		36,632		—
Commercial real estate: multifamily		165		168		565		—
Residential: first lien		6,278		6,445		7,136		305
Residential: junior lien		692		692		976		44
Consumer		1,195		1,196		1,211		2
Foreign		264		264		327		14
Total impaired loans with no related allowance	$	12,039	$	13,255	$	65,192	$	368

The following table details key information regarding our doubtful (previously referred to as impaired prior to the adoption of ASU 2016-13) loans by loan class at September 30, 2019, in accordance with ASC 310 prior to the adoption of ASU 2016-13:


	September 30, 2019
	Quarter to Date					Year to Date
	Average				Average
	Recorded		Interest		Recorded		Interest
	Investment		Recognized		Investment		Recognized

	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	602	$	—	$	616	$	—
Commercial real estate: other construction & land development		129		—		132		—
Total impaired loans with related allowance	$	731	$	—	$	748	$	—


	September 30, 2019
	Quarter to Date				Year to Date
	Average				Average
	Recorded		Interest		Recorded		Interest
	Investment		Recognized		Investment		Recognized

	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	8,002	$	1	$	17,945	$	2
Commercial real estate: other construction & land development		1,674		—		1,767		—
Commercial real estate: farmland & commercial		3,222		—		22,389		—
Commercial real estate: multifamily		653		—		656		—
Residential: first lien		6,427		78		6,698		231
Residential: junior lien		914		10		1,028		32
Consumer		1,131		—		1,088		—
Foreign		274		3		281		9
Total impaired loans with no related allowance	$	22,297	$	92	$	51,852	$	274

The following table details loans accounted for as “troubled debt restructuring,” segregated by loan class. Loans accounted for as troubled debt restructuring are included in Watch List—Doubtful loans.


	September 30, 2020		December 31, 2019

		(Dollars in Thousands)
Domestic
Commercial	$	—	$	32
Residential: first lien		4,149		5,608
Residential: junior lien		557		692
Consumer		888		1,192
Foreign		241		264
Total troubled debt restructuring	$	5,835	$	7,788

We are actively working with our customers affected by the current economic crisis arising from COVID-19. We have been offering and are prepared to continue to offer assistance in accordance with current regulatory guidance. That includes continuously reaching out to our customers and, in some cases, offering short-term payment deferral plans. As of November 3, 2020, we had approximately $1,799,000,000 in loans with some degree of payment deferrals in our system. In accordance with interagency regulatory guidance, these short-term deferrals are not considered troubled debt restructurings. The end of the deferral period on these loans will primarily be in the fourth quarter of 2020, and we anticipate that approximately 83% of the loans will resume regular payments at the end of their deferral period. We

expect that approximately 17% of the loans in some sort of deferral program will be requesting additional relief. The loans requesting additional relief will include some customers in the industries that have been significantly impacted by the COVID-19 pandemic, including the hospitality sector, the oil and gas industry, and retail developments.

With the passage of the Paycheck Protection Program (“PPP”), administered by the Small Business Association (“SBA”), we are actively assisting our customers with applications for loans through the PPP. PPP loans earn interest at 1% and PPP loans made prior to June 5, 2020 have a two-year term, while those made after June 5, 2020 have a five-year term; however, PPP loans also include forgiveness provisions that we expect most customers will utilize. Customers began submitting applications for the forgiveness program in the third quarter. PPP loans are intended to support up to 24 weeks of payroll and certain other costs to help those businesses remain viable and allow their employees to pay their bills. As of November 3, 2020, we had 4,944 PPP loans totaling approximately $455,347,000 outstanding. The PPP loans are fully guaranteed by the U.S. government through the SBA.

The Subsidiary Banks charge-off that portion of any loan which management considers to represent a loss as well as that portion of any other loan which is classified as a “loss” by bank examiners. Commercial and industrial or real estate loans are generally considered by management to represent a loss, in whole or part, when an exposure beyond any collateral coverage is apparent and when no further collection of the loss portion is anticipated based on the borrower’s financial condition and general economic conditions in the borrower’s industry. Generally, unsecured consumer loans are charged-off when 90 days past due.

While our management believes that it is generally able to identify borrowers with financial problems reasonably early and to monitor credit extended to such borrowers carefully, there is no precise method of predicting loan losses. The determination that a loan is likely to be uncollectible and that it should be wholly or partially charged-off as a loss is an exercise of judgment. Similarly, the determination of the adequacy of the ACL can be made only on a subjective basis. It is the judgment of our management that the ACL at September 30, 2020 was adequate to absorb probable losses from loans in the portfolio at that date.

The following tables present information regarding the aging of past due loans by loan class at September 30, 2020 and December 31, 2019:


	September 30, 2020
							90 Days or		Total
	30 - 59		60 - 89		90 Days or		greater &		Past				Total
	Days		Days		Greater		still accruing		Due		Current		Portfolio

	(Dollars in Thousands)
Domestic
Commercial	$	3,079	$	238	$	1,439	$	971	$	4,756	$	1,873,223	$	1,877,979
Commercial real estate: other construction & land development		2,242		16,603		142		142		18,987		1,924,443		1,943,430
Commercial real estate: farmland & commercial		1,702		259		—		—		1,961		2,108,989		2,110,950
Commercial real estate: multifamily		22		137		—		—		159		437,778		437,937
Residential: first lien		2,288		910		6,427		5,963		9,625		400,390		410,015
Residential: junior lien		564		722		945		945		2,231		621,400		623,631
Consumer		460		35		36		33		531		40,579		41,110
Foreign		461		250		205		205		916		143,267		144,183
Total past due loans	$	10,818	$	19,154	$	9,194	$	8,259	$	39,166	$	7,550,069	$	7,589,235


	December 31, 2019
							90 Days or		Total
	30 - 59		60 - 89		90 Days or		greater &		Past				Total
	Days		Days		Greater		still accruing		Due		Current		Portfolio

		(Dollars in Thousands)
Domestic
Commercial	$	3,134	$	626	$	1,292	$	421	$	5,052	$	1,287,608	$	1,292,660
Commercial real estate: other construction & land development		509		55		—		—		564		2,185,319		2,185,883
Commercial real estate: farmland & commercial		8,058		2,031		54,928		54,878		65,017		1,831,730		1,896,747
Commercial real estate: multifamily		313		—		165		—		478		189,952		190,430
Residential: first lien		3,229		1,670		3,660		3,107		8,559		425,342		433,901
Residential: junior lien		1,112		477		1,200		1,200		2,789		703,687		706,476
Consumer		467		75		88		88		630		47,170		47,800
Foreign		1,347		3		11		11		1,361		139,688		141,049
Total past due loans	$	18,169	$	4,937	$	61,344	$	59,705	$	84,450	$	6,810,496	$	6,894,946

The increase in Commercial Real Estate - Other Construction and Land Development loans 60-89 days past due at September 30, 2020 can be attributed a loan secured by a commercial pad site. This loan is currently classified as a Watch-List Substandard loan. The decrease in Commercial Real Estate - Farmland and Commercial loans 90 days or greater for the same period can be attributed to a relationship secured by real estate on which children’s learning centers are operated.

A summary of the loan portfolio by credit quality indicator by loan class and by year of origination at September 30, 2020 is presented below. A summary of the loan portfolio by credit quality indicator presented at December 31, 2019, based on guidance prior to the adoption of ASU 2016-13, is also presented below:



		2020	2019		2018		2017		2016		Prior		Total

	(Dollars in Thousands)
Balance at September 30, 2020
Domestic
Commercial
Pass	$	1,092,774	$	307,257	$	171,592	$	133,566	$	19,838	$	11,571	$	1,736,598
Special Review		72,904		393		—		—		—		—		73,297
Watch List - Pass		1,227		34,757		29,658		—		—		22		65,664
Watch List - Substandard		—		—		653		—		323		—		976
Watch List - Doubtful		799		314		163		168		—		—		1,444
Total Commercial	$	1,167,704	$	342,721	$	202,066	$	133,734	$	20,161	$	11,593	$	1,877,979
Commercial real estate: other construction & land development
Pass	$	613,492	$	665,095	$	450,605	$	132,837	$	13,965	$	7,602	$	1,883,596
Special Review		12,625		—		—		—		—		—		12,625
Watch List - Pass		2,344		25,185		—		—		—		—		27,529
Watch List - Substandard		18,769		—		—		—		—		—		18,769
Watch List - Doubtful		118		793		—		—		—		—		911
Total Commercial real estate: other construction & land development	$	647,348	$	691,073	$	450,605	$	132,837	$	13,965	$	7,602	$	1,943,430
Commercial real estate: farmland & commercial
Pass	$	561,310	$	524,354	$	333,348	$	201,824	$	200,296	$	143,109	$	1,964,241
Special Review		1,368		—		4,792		179		3,228		—		9,567
Watch List - Pass		25,467		8,885		20,482		8,879		7,448		1		71,162
Watch List - Substandard		3,315		55,728		168		2,293		478		3,497		65,479
Watch List - Doubtful		—		221		—		38		—		242		501
Total Commercial real estate: farmland & commercial	$	591,460	$	589,188	$	358,790	$	213,213	$	211,450	$	146,849	$	2,110,950
Commercial real estate: multifamily
Pass	$	49,110	$	220,573	$	83,584	$	64,674	$	8,392	$	11,467	$	437,800
Watch List - Doubtful		137		—		—		—		—		—		137
Total Commercial real estate: multifamily	$	49,247	$	220,573	$	83,584	$	64,674	$	8,392	$	11,467	$	437,937
Residential: first lien
Pass	$	58,068	$	65,854	$	77,011	$	58,475	$	35,966	$	114,140	$	409,514
Watch List - Pass		—		14		131		—		—		1		146
Watch List - Substandard		—		—		62		—		50		—		112
Watch List - Doubtful		89		—		—		—		88		66		243
Total Residential: first lien	$	58,157	$	65,868	$	77,204	$	58,475	$	36,104	$	114,207	$	410,015
Residential: junior lien
Pass	$	158,909	$	123,056	$	72,302	$	88,890	$	67,720	$	111,075	$	621,952
Special Review		—		830		—		811		—		—		1,641
Watch List- Doubtful		—		—		38		—		—		—		38
Total Residential: junior lien	$	158,909	$	123,886	$	72,340	$	89,701	$	67,720	$	111,075	$	623,631
Consumer
Pass	$	25,683	$	12,392	$	1,360	$	266	$	95	$	1,311	$	41,107
Watch List - Doubtful		—		—		—		—		—		3		3
Total Consumer	$	25,683	$	12,392	$	1,360	$	266	$	95	$	1,314	$	41,110
Foreign
Pass	$	82,393	$	32,680	$	12,738	$	6,786	$	3,711	$	5,875	$	144,183
Total Foreign	$	82,393	$	32,680	$	12,738	$	6,786	$	3,711	$	5,875	$	144,183
Total Loans	$	2,780,901	$	2,078,381	$	1,258,687	$	699,686	$	361,598	$	409,982	$	7,589,235


			December 31, 2019
			Special		Watch		Watch List—		Watch List—
	Pass		Review		List—Pass		Substandard		Impaired

			(Dollars in Thousands)
Domestic
Commercial	$	1,228,110	$	569	$	39	$	62,007	$	1,935
Commercial real estate: other construction & land development		2,090,370		18,721		41,949		33,905		938
Commercial real estate: farmland & commercial		1,710,446		13,184		20,183		151,726		1,208
Commercial real estate: multifamily		190,265		—		—		—		165
Residential: first lien		426,546		253		144		680		6,278
Residential: junior lien		704,958		826		—		—		692
Consumer		46,605		—		—		—		1,195
Foreign		140,785		—		—		—		264
Total	$	6,538,085	$	33,553	$	62,315	$	248,318	$	12,675

The increase in Special Review Commercial loans at September 30, 2020 can be attributed to the movement of a relationship in the oil and gas production business from the Pass category. The increase in Watch-List Pass Commercial loans at September 30, 2020 can be attributed to the downgrade of a relationship in the oil and gas production business from Pass. The decrease in Watch-List Substandard loans for the same period can be attributed to the upgrade of a relationship in the aircraft purchasing and leasing business to Pass. The decrease in Watch-List Pass Commercial Real Estate Construction and Land Development loans at September 30, 2020 can be attributed to the downgrade of a loan secured commercial pad site to Watch-List Substandard. The change in Watch-List Substandard loans in this category is also being impacted by the upgrade of a relationship in the real estate development business to Pass. The increase in Watch-List Pass Commercial Real Estate Farmland and Commercial loans can be attributed to the downgrade of a relationship secured by commercial real estate from Pass. The decrease in Watch-List Substandard loans in the same category can be attributed to the upgrade of a relationship secured by a resort to Pass.